Why Investors Are So Eager To Cash out In Yahoo! Inc. (YHOO)?

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Investors pushing for a sale of Yahoo! Inc. (NASDAQ:YHOO)’s core assets does not come as a surprise. Led by Activist investor Starboard Value, most of them have lost confidence in the current management team. A sell off of the company’s core assets is now seen as the only way out of the current standoff.

Once an Internet pioneer, Yahoo! Inc. (NASDAQ:YHOO) is no more having seen its worth shrink from highs of $255 billion in early 2000’s to current lows of about $34 billion. A market value of about $34 billion is roughly the value of the company’s stakes in Asian holdings. What this means is that the company’s core Internet business could be somehow worthless.

Genesis of Yahoo Woes

Yahoo! Inc. (NASDAQ:YHOO) finds itself in the current mess after a series of missteps and bad bets. Six CEO’s in the past nine years is a confirmation of the uncertainty and a lack of direction that the company has grappled with over the years. Mayer on her appointment was seen as the savior. Four years down the lane, the former Google executive is wanted no more; her turnaround plan having failed to trigger any form of growth.

A spending spree on talent and executives since Mayer took over has failed to have any impact on the embattled search giant. Investors have lost touch with her management style more and are questioning her spending big chunks of money on questionable assets like Tumblr that have failed to yield any positive results.

Emerging Risks

Having seen the company’s market cap shrink from $255 billion to $34 billion, many believe it is time to stop the bleeding by pursuing a selloff of core assets. Chances of Yahoo picking itself from the current mess are low according to investors.

Yahoo! Inc. (NASDAQ:YHOO) is no longer a juggernaut it used to be in the search business having come under pressure from the likes of Google and Bing. Advertising has remained a key driver of earnings in the recent past, but concerns over the impact of competition continue to dash investors’ confidence on the same. Given the level of competition in the space that continues to grow by the day many now, fear the company could struggle to grow from the current levels.

Bidding Process

The company has already started meeting potential bidders looking to buy some of its assets. Starboard raised concerns about the urgency of the process, the company had no option but to put a deadline of April 11 for filing of bids. Setting up a deadline for the same could be an indication that the firm is serious about exploring a possible sale.

Media companies are already showing interest in Yahoo’s internet business, news that should go well with shareholders pushing for a sale. Daily Mail and Time Warner Inc (NYSE:TWX) are reportedly considering tabling a bid. Verizon Communications Inc. (NYSE:VZ) has also shown interest on some of the assets up for sale.

Technology companies have also shown interest with Microsoft Corporation (NASDAQ:MSFT) spearheading the bidding process according to reports. A potential bid from Alphabet Inc (NASDAQ:GOOGL) could, however, fall through because of antitrust issues.

Conclusion

Yahoo! Inc. (NASDAQ:YHOO)’s options are limited given the fact that shareholders will always have their way due to growing activist investor pressure. Should Yahoo decide to enter into a purchase agreement, it promises to be a complicated deal that could take long to complete.

A proxy fight could erupt should Yahoo! Inc. (NASDAQ:YHOO) decide not to sell itself. Starboard Value has already said it would nominate a new slate of directors should the company fail to consider any of the offers. Regardless of the outcome, chances Mayer retaining her post are slim, her turnaround plan having failed miserably.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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